Term Paper on Analyzing the Cost Structure of a Manufactured Good: A Comprehensive

Study of Cost Management Strategies at PinPoint Design Company.

Submitted to
Md. Jamil Sharif, PhD
Associate Professor,
University of Dhaka.

Submitted by

Members Id

Batch-6
Section: B
Department of Business Administration in Management Studies
Faculty of Business Studies
Bangladesh University of Professionals

Date of Submission: 09 January, 2025

 Chapter-Four
Findings and Analysis
 PinPoint Design is a Garment's Accessories manufacturer & Supplier has the following cost and expense data
for the year ending 2024 .

Cost article Product-A Product-B

Elastic Febrics Paper Card
Beginning Inventory 60 Lac 80 Lac
Ending inventory 65 Lac 95 Lac
Raw materials puchase (plastics, polystyrene, etc.) 80 Lac
Transportation Cost 20000 TK 20000 TK
Purchase Return & allocation (1-2)% (1-2)%
Wages for assembly line workers

Additional salaries for office 4 Lac

Fixed Cost 95000 TK

Security Expenses 15000 TK

Rent for factory 60000 TK per month

Rent on factory equipment 1.5 Crore

Insurance on factory building Rented

Total Manufacturing Overhead

VAT 7.50%
Wholesale selling price As per product design, quality and
Utility costs for factory measurement
60000 TK
Supplies for general office To thorugh export Garments
Depreciation on office equipment 3%
Miscellaneous materials (glue, thread, etc.) 40000 TK
Factory manager's salary 40000 TK
Property taxes on factory building Rented
Advertising Expense 5%
Sales commissions (1-5)%
Depreciation on factory building ranted
Work in Process beginning of the year 80%
Work in Process ending of the year 80%
Direct Labor Cost 100000 TK
Labor hour 8 Hrs
Indiect Labor Cost 60000 TK
Account recieveable beginning of the year 2.5 Crore
Account receiveable ending of the year 3 Crore
Sales Discounts (1-3) %
Sales 1 Crore (Month)
Plant Manager's Salary 45000 TK
Factory Repairs 50000 TK
Beginning Finished Goods Inventory 70 Lac 90 Lac
Ending Finished Goods Inventory 80 Lac 1 Crore
Operating Expenses 600000
Gross Profit 15%
Target profit 25%
others………………………….. As per customer situtation
4.1 Cost Classification
4.1.1 Explanation of some cost type with examples:

1. Variable Cost
 Definition: Costs that vary directly with the level of production or sales.
 Example: A bakery’s cost of flour, sugar, and eggs increases as more cakes are baked. If
one cake requires $5 worth of ingredients, the cost for 100 cakes is $500.
2. Fixed Cost
 Definition: Costs that remain constant regardless of production or sales levels.
 Example: The bakery pays $1,000 monthly rent for its shop, regardless of how many
cakes are baked or sold.
3. Period Cost
 Definition: Costs not tied directly to production; incurred over a specific time period.
 Example: Advertising expenses of $500 for the bakery in January. This cost is
recognized in January regardless of how many cakes are produced.
4. Product Cost
Costs directly related to producing goods. These can be broken down into:
 Direct Material: Raw materials used directly in production.
o Example: $2 worth of flour and sugar used per cake.
 Direct Labor: Labor costs directly attributable to the product.
o Example: $3 in wages paid to a worker for baking one cake.
 Manufacturing Overhead (MOH): Indirect production costs.
o Example: $50 in electricity and $100 for equipment maintenance used during the
production process.
5. Sunk Cost
 Definition: A cost that has already been incurred and cannot be recovered.
 Example: The bakery spent $2,000 last year on a custom oven that is no longer used. The
cost of the oven is a sunk cost and irrelevant to current decisions.
6. Opportunity Cost
 Definition: The benefit forgone by choosing one alternative over another.
  Example: The bakery owner has $10,000 and decides to invest it in advertising instead of
buying new equipment. The opportunity cost is the increased production efficiency the
bakery could have achieved with the new equipment.

4.1.2 Cost Identification of PinPoint Company

Product cost
Variable Cost

Opportunity
Period Cost

Sunk Cost
Fixed cost

cost
material
Direct

Direct
Labor

MOH

4.2 Cost Determination:

4.1.1 Cost of Good Manufactured:

 PinPoint Design Company
Schedule of Cost of good manufactured
For the year ended dec-31, 2024

Particulars Amount (TK) Balance

Direct Materials
Beginning Inventory 60,00,000
Purchese 80,00,000
Less Return (2%) (1,60,000)
Add: Transportation cost 20,000
Net Direct Materials 7,860,000
less Ending Inventory (65,00,000)
Cost of Raw Material Used 13,60,000
Direct Labor 1,00,000
Prime cost 7,460,000
Manufacturing Overhead
Security Expenses 15000
Rent for factory 60000
Rent on factory equipment 15,000,000
Utility costs for factory 60,000
Miscellaneous materials 40,000
Factory manager’s salary 40,000
Plant manager’s salary 45,000
Factory repairs 50,000
Indirect labor cost 60,000
Total Manufacturing Overhead 15,370,000

Total Manufacturing Costs 22,830,000

Add: Work-in-process (beginning) 80%
Less: Work-in-process (ending) 80%

Cost of Goods Manufactured 22,830,000

4.1.2 Income Statement

 PinPoint Design Company
Schedule of Income Statement

Particulars Amount (TK)

Sales 12,00,00,000
Less: Sales discounts (3%) 36,00,000
Net Sales 116400000
Less: Cost of Goods Sold
Cost of Goods Manufactured 22,830,000
Beginning Finished Goods Inventory 70,00,000
Less Ending Finished Goods Inventory (80,00,000)
Cost Of Good Sold 21830000
Gross Profit 138230000
Less: Operating Expenses (6,00,000)
Advertising Expense (5%) (60,00,000)
Sales commissions (5%) (60,00,000)
VAT 7.5% (90,00,000)
Net Income 11,66,30,000